JUSTICE WAITS

Sentencing delayed again for former West Linn man who bilked at least $24 million

He stared straight ahead.

People he had known for 10 years, 20 years - people he had once called friends but whom he had swindled out of millions of dollars - packed the three rows of court benches directly behind 56-year-old Charles Wesley Rhodes Jr.

But the silver-haired Rhodes never looked at them.

They had come - many of them nearing retirement age, or past it - to this federal court hearing on Monday, as they had come to any of a number of court hearings concerning their former 'friend' during the past 19 months.

They had come to watch, as Rhodes continued to try - in their minds, at least - to wriggle free. To avoid the justice they've been awaiting for nearly two years.

Fifteen minutes later, the hearing was over. Rhodes, whose second attorney had told the judge six weeks ago that they no longer could work together, had been appointed a new lawyer.

Rhodes pleaded guilty in August on mail fraud and money laundering charges - in a case that involves what prosecutors say was the theft of tens of millions of dollars in a Ponzi scheme that is among the largest, if not the largest, ever seen in Oregon.

But with the appointment of a new attorney, Rhodes' sentencing, which first had been set for November 2007, then set for early this month, was pushed back again. Another six months, to October of this year.

And with that, Charles Wesley Rhodes Jr. - everyone knows him as Wes - was free to go. He walked past the people still standing in front of the courtroom benches - avoiding eye contact with any of them - and out of the room, to the first elevator door that would open.

He and his attorney stepped inside. The lawyer pushed an elevator button. The door closed.

And Wes Rhodes was gone. Yet again.

Where did all the money go?

Rhodes' clients all remember the moment - on Sept. 22, 2006, or maybe the day after - when their lives changed forever.

When their retirement dreams, their children's inheritances, their grandchildren's college funds, were vaporized - instantly - as if they had put everything they owned onto one horrifically bad bet. Which, unwittingly, they had done.

The federal Securities and Exchange Commission obtained a court order Sept. 21, 2006, freezing all assets of Rhodes and three investment companies he controlled.

The SEC said then that Rhodes, with an office in Lake Oswego, had operated, in essence, a Ponzi scheme that had bilked his client investors out of more than $13 million.

The financial receiver appointed by the court to investigate Rhodes' assets and financial records estimated last year that the stolen money actually amounted to at least $24 million, probably more. The receiver could only examine detailed records back to 1998.

But assuming there's not a large amount of money hidden someplace - which some investors still wonder about - all but a few million dollars is gone.

Where?

To Wes Rhodes' remarkable spending over the past decade or so, on himself and his wife, according to court and receiver's records.

Between 1998 and September 2006, according to the receiver's investigation, Rhodes had used his investors' money to spend more than $3.2 million on luxury and exotic cars, more than $2 million on loan and credit card payments, and more than $418,000 on mortgage payments on a $1.1 million house in West Linn he owned until his fraud was discovered.

In total, he and his businesses spent more than $18 million in that eight-and-three-quarter-year period - excluding the $1.6 million he spent on his company's payroll.

While the numbers are staggering, what matters to many of Rhodes' former clients is not a number, but a word: everything.

Many of Rhodes' clients had been with him for years, and had slowly transferred most of their assets to sometimes vaguely described 'stock' or 'bond' or 'diamond portfolio' accounts with him.

Dick Helmberger and his wife owned a print shop in Beaverton until they decided they could sell it and retire in September 2005. All the money from the sale proceeds went into their 'accounts' with Rhodes, which ended up being 'well over a million dollars,' Helmberger says. They moved to Marietta, Calif., to enjoy their retirement.

Since September 2006, the Helmbergers have had to leave high-cost Marietta and move to Las Vegas, where Dick Helmberger has struggled to find work. After trying to sell furniture for a while, he now sells fuel and oil for an oil company.

'We worked so hard for so many years,' Helmberger says. 'And boom - all gone.'

Neither the court-appointed receiver nor prosecutors in Rhodes' criminal case returned phone calls to talk about the case. A man who answered a phone number that Rhodes had listed on a police report also declined to comment.

'If you got my phone number, you got it improperly - it's unlisted,' he said. 'I have no comment. I'm sorry, I can't help you. Have a good day.'

Rhodes' newly appointed attorney, Michael Levine, also declined to comment.

This story of Rhodes - and how he's been able to stay out of prison more than a year and half after that SEC September 2006 action, even while attempting to hide assets and having been found in contempt of court - was put together through voluminous court records, receiver reports and interviews with several former Rhodes investors.

It's a story with plenty of strange twists, especially in the months since Rhodes actually pleaded guilty.

But it's also a story a bit different from similar stories of schemers and the people financially devastated by them.

Rhodes generally didn't promise anyone they would get rich quickly with him, according to several of his former investors. His scheme didn't play out in a year or two or three, or require a constant churning of new investors to keep it afloat.

Rhodes stole money, undetected, over a much longer period, from people he had known, clients he maintained, for years, even decades, court and receiver's records say.

The investors interviewed for this story said that they remember things they wished they had taken better note of at the time. Rhodes often would be resistant whenever they wanted to make a large withdrawal, or would plead that it would take time for him to free up the money.

He often would suggest they withdraw money from the Charles Schwab accounts he had set up for them (legitimate accounts), instead of withdrawing from the 'private' stock or bond accounts he supposedly maintained in their name - which court and receivership records say is how Rhodes stole the money.

But every three months, the investors would get statements from Rhodes, showing how their investments were doing - statements that looked reasonable but that, at least regarding the 'private' accounts, were fiction.

Court records and the receiver's report indicate that much of what Rhodes did followed the classic script of a Ponzi scheme. Most of Rhodes investors' money was intermingled.

When an investor would request a 'withdrawal' of money, Rhodes would find it someplace among his accounts to pay it.

The receiver's report also said Rhodes' statements to investors often showed rates of return 'in excess of 25 percent.'

But Rhodes investors said that, while the 'private' accounts often gave few details on the underlying investments, the supposed annual rates of return were never excessive - often 7 percent or 8 percent per year.

'It wasn't one of these 'Double your money in 60 days,' ' says Tim Merrihew, a former vice president with Phillips Electronics who lives in Tualatin, who was best man at Rhodes' 2000 wedding to his third and current wife, and who invested more than $1 million with Rhodes.

Merrihew says Rhodes' victims generally were people who saved all their lives and thought they were being conservative with their investments, and were not what people often assume in these schemes - 'rich people' greedily chasing more money in ill-advised ways.

'To say we're a little sensitive to that - at least for me - is an understatement,' Merrihew says.

There were annoying things about Rhodes, investors say - he was boastful, talked excessively about how hard he worked for investors, and often made questionable claims.

Then there was Rhodes' spending.

Not all investors, but some, knew of Rhodes' spending on luxury or exotic or sports cars. When the SEC froze Rhodes' assets, he owned 33 cars - most of which he kept in a special 'museum' building on his property in West Linn and five of which he or his wife routinely drove. The cars included a 2005 Ferrari, a 2005 Maserati, a 2004 Acura TSX and five 1967 Chevy Corvettes.

The museum building also had entire rooms devoted to furniture and art, and to baseball and music memorabilia collections.

Veterinarian Doug Gribskov was a partner with Rhodes in some veterinary businesses and was a longtime investor who, with his wife, family and business, invested more than $2 million with Rhodes. That included pension money for his veterinary business employees.

Gribskov says he and his wife, who spent money conservatively, 'would look at (Rhodes spending) and say, 'Well, he's choosing to spend it. And that's his problem.' Until we find out - that's our money. He was just spending on crap.'

Sad case takes strange turns

But while the Wes Rhodes world that revealed itself in September 2006 was strange enough, what's happened since then has bordered on the surreal. And, for his victims, it's all increasingly frustrating.

A few highlights:

• In October, a couple of months after Rhodes had pleaded guilty to the federal charges and after Rhodes had told investigators that he had revealed all of his assets and financial records, officials learned of the existence of a storage unit he had rented in Wilsonville.

Among the things discovered there: $38,000 in cash, three Rolex watches, and about 30 boxes of records relating to Rhodes investors.

• On Dec. 18, Rhodes and his wife were scheduled to appear at a federal court hearing on whether they should be held in contempt of court for not revealing the storage unit, and for trying to sell $48,000 worth of furniture that they also had not revealed to the courts.

Rhodes' wife, Anne, appeared, as did his mother, to be deposed about how much his mother may have provided to Anne Rhodes for a down payment on the Oregon City house that Anne - who before marrying Rhodes had few assets - bought in May for $438,000. The house is where the Rhodeses now live.

But Rhodes did not appear. Shortly before the hearing, Rhodes apparently was checked into a hospital. But he was out quickly: He was seen two days later outside his house, an SEC lawyer wrote in a letter to the federal judge overseeing the SEC civil case against Rhodes.

(At a later hearing, the judge found Rhodes in contempt of court, but imposed no penalty other than forcing him to relinquish the contents of the storage unit, the furniture, two cars and a truck.)

• On Feb. 27 of this year, Rhodes told Oregon City police responding to a 911 call that, while he was walking his dog in his neighborhood, a gray truck drove past him and someone on the passenger side shot him in the head.

Rhodes had a gash on his head, that, according to Oregon City police reports, medical personnel thought might have happened when Rhodes fell to the ground.

Rhodes told police he believed some of his former clients might have been responsible. He also told the cops, according to police reports, that he now might withdraw his guilty plea in the federal criminal case because 'my civil rights have been violated.'

In a court hearing last month, when Rhodes appeared with a bandage on his head and with his arm in a sling, his then-lawyer, Jacob Wieselman, told the judge that 'Mr. Rhodes was shot several weeks ago. The police in Oregon City at this point are working on the operating belief that one of the purported victims in this case … may have taken a shot at him.'

The judge asked: 'An actual gunshot wound?'

Wieselman replied: 'That's the belief, Your Honor, yes.'

In fact, the Oregon City police reports indicate officers never thought the wound was from a gunshot, or that anyone had shot at Rhodes, and shortly thereafter suspended investigation of the case.

Rhodes has worn his arm in a sling at all court hearings since.

Prosecutors have said they plan to recommend Rhodes serve 210 months in prison. But some of his former investors worry he'll get a lesser sentence.

The system continues to accommodate Rhodes, the investors say.

It did eight years ago - when the state of Oregon fined him $12,500 for providing investment advice without being a registered adviser and for selling unregistered securities. The state suspended $5,000 of the fine and gave him a conditional license that allowed him to continue his business.

None of the investors interviewed for this article knew of that sanction until 2006.

And the accommodating continues now, even after he's acknowledged stealing millions of dollars, the investors say.

'If Rhodes walked into my clinic and stole $200 from me, he'd be arrested and locked up in jail,' Gribskov says. 'He's out running around. He's still driving a big fancy car, living in a nice house. Emotionally, that takes a toll on people.'

Dozens of victims still show up at the court hearings. And they keep track of news of the case - or just vent - on a blog that Cate Garrison, one of Rhodes' former investors, started writing in March of last year: Lifeafter rhodes.blogspot.com.

But many are beyond frustration, they say.

'If the whole thing wasn't so tragic, it would be comical,' says Susan Aust, who invested more than $300,000 with Rhodes - money, she says, that Rhodes knew she needed to allow her to quit her job and care for her daughter, who had cancer and died last year at the age of 20.

'The whole ploy is to drag it out as long as possible so people give up - so the victims will give up,' Aust says.

Todd Souvignier, whose mother, Nancy, invested much of her money with Rhodes and died eight months after the SEC action, has tempered hopes about justice.

'We live in a country and a world where justice is a game,' he says. 'And it's a game that generally runs to the benefit of those with money. So our expectations for justice in this situation are, you know, low.'

At the hearing Monday, Rhodes' sentencing hearing was set for the week of Oct. 6 - more than two years after the SEC froze his assets and charged that he was stealing from investors.